OTTAWA — Canada’s hot housing market received a clean bill of health from a major Canadian bank Friday, dismissing concerns voiced by the Bank of Canada that consumers may be taking on too much debt.

In a report on house and stock market rallies, economists with CIBC World Markets argue that the central bank’s concerns are exaggerated, even though the bank was justified in raising them.

“Canada is not doomed to see a U.S.-style housing and mortgage blow-up,” wrote CIBC’s chief economist, Avery Shenfeld.

“The lessons for the U.S. were not that an extended period of low rates caused a mortgage and housing blow-up. It was a massive failure to supervise the worst excess of the American mortgage market that caused the trouble.”

Last week, the Bank of Canada called record household debt the top risk facing the country’s financial system, a warning repeated in Toronto earlier this week by the central bank’s governor, Mark Carney.

The central bank did note that the risk to Canada’s banking system was small, but worried that when interest rates rise to normal levels, up to 10 per cent of households could face difficulties in meeting monthly payment requirements.

Fresh data released Friday showed that spending by Canadian households averaged $71,360 last year, two per cent more than in 2007, with shelter representing about 20 per cent of the load.

Others have also expressed concern about consumer debt levels. In a note Friday, Bank of Montreal economist Sal Guatieri said at current rates the debt burdens being piled on by Canadians could reach American and British levels “just before they keeled over.”

CIBC’s Shenfeld and Benjamin Tal say their analysis shows that there is basis for the concern, but there are also critical factors that make the Canadian situation different.

By their calculation, the current $350,000 average selling price for a home in Canada is about seven per cent too high.

But they also say that with housing starts on the rise, thereby increasing the supply, the price of housing in Canada will moderate, not collapse.

And Canadian households are not exposed as their southern neighbours were to a market collapse.

Some have substantial equity in their homes and could downsize. Others, about 40 per cent of mortgage holders, have high debt payments because they are making accelerated pay-downs on principal, which they could suspend.

They note that while mortgage interest rates average about 4.4 per cent, payments as a share of after-tax income are higher — at the level they would be if rates were effectively six per cent.

And “history suggests many will jump into fixed mortgages” once variable rates come under upward pressure.

“The Bank of Canada was justified in raising these concerns, but once you get into the details, some of those threats don’t appear quite as ominous,” Shenfeld explained in an interview.

The CIBC economists agree with Carney that interest rates will rise, likely starting in the second half of next year, but “we don’t see that as endangering a bubble either in the mortgage market or the equity market.”

In a separate analysis, Shenfeld, Peter Buchanan and Krishen Rangasamy, all of CIBC, judged that the equity markets in Toronto still have room to grow even if some analysts believe stocks are overpriced already.